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How to manage your inheritance funds during a divorce

Property division is among the more complicated issues during a divorce. Although inheritances are generally not considered to be marital property, once an inheritance is shared things can get tricky. And, with laws varying from state to state, things can get further convoluted if you are not familiar with the laws.

Wealth inherited or earned prior to a marriage is generally considered separate property, meaning it is property that will stay with you in the event of a divorce. This means that the money is not vulnerable to an equal distribution in the event of a divorce. However, if you receive an inheritance during the course of a marriage, how the inheritance is received can affect how the money is split in the event of a divorce. One word that comes up often when discussing and deciphering the laws is "comingling."

When inheritance money is deposited into a joint account and used for marital expenses, it is considered comingling and the person who receives the inheritance loses his or her immunity to the money. The same is applicable if the inheritance money is used to make improvements to a primary residence; again, the recipient of the inheritance may lose the immunity to the money.

Understanding the laws is the first step in protecting your marital property and inheritance money. If you are entering a marriage, you may want to consider creating a prenuptial agreement, which can address not only current inheritance money, but any money inherited in the future by either party.

Source: findlaw.com, "Inheritance and Divorce", Accessed June 2, 2015

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